The Thomson Reuters/INSEAD Asia Business Sentiment Index
fell to 62 in the fourth quarter from 66 in the third
quarter of 2013, the lowest reading since the third quarter of
2012. A reading above 50 indicates an overall positive outlook.

Sentiment in Southeast Asia's $1.5 trillion economy was
undermined by political turbulence in Thailand and a typhoon in
the Philippines, causing dismal readings of 40 and 58
respectively, which were the lowest for both countries since the
poll was first compiled in 2009.

Although China and India's bullish scores of 75 and 82
respectively supported the index, export-driven north Asian
economies such as South Korea as well as regional trading hub
Singapore also showed weaker readings, underscoring
still-anaemic global business conditions.

"The global economic recovery is still very fragile," Zhang
Shiyuan, an economist at Shanghai-based Southwest Securities Co
said. "There is a fundamental problem that there's still too
much debt. It's a time bomb that may be detonated if monetary
and fiscal policies don't coordinate well."

The survey showed that the auto sector was the most negative
with a reading of 33, a sharp drop from 63 in the previous
quarter, followed by the food and resources sectors with
fourth-quarter scores of 50.

The index surveyed more than 100 of the Asia-Pacific
region's top companies including Hyundai Heavy Industries
, Fast Retailing and International Container
Terminal Services Inc (ICTSI) in 11 economies, across
sectors including property, financials and tech.

The poll, conducted by ThomsonReuters in association with
INSEAD, a global management and business school, was compiled
between Dec. 2-13.

Of the 128 companies that responded, two-thirds reported a
neutral outlook while less than 30 percent were positive in
their prospects.

SOUTHEAST ASIA HIT, CHINA & INDIA SUPPORT

Among ASEAN countries that had remained comparatively upbeat
earlier this year, Malaysia remained the only bright spot with a
score of 75, up from 69 in the last quarter.

In contrast, companies in Thailand were the most negative in
Asia with a 40-index reading, plunging from 71 in the previous
quarter as signs of prolonged political uncertainty due to
anti-government protests against Yingluck Shinawatra's ruling
party hit business sentiment.

Corporate sentiment in the Philippines tumbled to 58 from
the maximum score of 100 in the previous quarter due to the
devastating effects of Typhoon Haiyan in early November that
killed more than 5,200 people and destroyed an estimated 24
billion pesos ($543.60 million) in crops and infrastructure.

Among north Asian economies, Japan retreated to a
fourth-quarter score of 55 from 63 in the previous quarter as
the buzz around Abenomics deflated. The outlook in South Korea
remained steady at a neutral 50.

A glimmer of hope came from China, the world's
second-largest economy, which showed an uptick in fourth-quarter
sentiment to 75 after holding steady at 50 earlier this year.

"The companies appear to be upbeat on the expectation that
overseas demand for Chinese exports will improve. Hopes stemming
from the government's reform measures announced in Q3, and
rising income levels that could drive spending, are also causes
for positive sentiment," said Cui Hongmei, a China market
analyst at Seoul-based Daewoo Securities Co.

India's bullish outlook also supported the index, with a
fourth-quarter score of 82 compared to 67 in the previous
quarter as improving manufacturing conditions in the 1.3
billion-strong country shrunk the trade deficit by 23 percent
between April-November 2013.

RISING COSTS WEIGH ON DEFENSIVES

Broken down by sector, builders in Asia were the most
bullish with a maximum reading of 100 for the second consecutive
quarter, followed by pharmaceuticals and property sectors with
readings of 75.

Defensive sectors such as food and retail were both down
from the previous quarter to readings of 50, as companies cited
rising costs as their biggest risk.